Hindery Offers Telcos Some Words of Love

By MIKE FARRELL -- Multichannel News, 2/5/2001

NEW YORK-Former AT&T Broadband president Leo J. Hindery Jr. thinks the telecom industry needs its own "summer of love."

Speaking at a telecom industry investment conference, Hindery warned that the exponential growth in the number of industry participants-1,700 by his count-coupled with a limited market, the high capital costs associated with the business and the strength of incumbent providers, could spell doom for a large number of companies.

"Faced with similar circumstances and prospects in the winter of 1996, the cable industry embarked on a two-part strategy, which I strongly recommend today for the telecom industry," Hindery said. "That strategy was hallmarked by a very quick industry consolidation, what some of us called the 'summer of love,' and by quality of execution."

Hindery said that over time, the cumulative growth of Internet-protocol-based telecom data will be explosive. But he cautioned that it is "neither as additive as what is contemplated, nor will it occur at almost the ridiculously grand growth rates predicted by some."

While IP-data traffic will probably continue to double each year, he added, it won't double every three or four months, as some have predicted.

Hindery said that continued high investment in transport providers will be needed to meet competition and to lower costs. As a result, legacy voice and data services will struggle to meet competition.

"Turmoil will be everywhere," Hindery said, "as challengers, well-heeled and otherwise, continue to go after incumbents and incumbents wrestle with external and internal capitalization and crushing, crushing restructuring issues."

Hindery also had some harsh words for cable overbuilders, adding that he doesn't think any overbuilder strategy will work because it is a response to a perception of vulnerable competition, not an opportunity to increase shareholder value.

"The overbuilders I see are just reactionaries," Hindery said.